The winters are upon us. So are the usual dilly-dallying tactics when it comes to providing natural gas to different sectors. The government, it appears, is yet to make up its mind on how to prioritise natural gas across sectors these winters. From the fertiliser perspective, it is imperative the SNGPL network ensures timely and adequate supply of the raw material feedstock gas, failing which could create trouble.
There is nothing much to write home about the urea and DAP off-take patterns. Urea off-take continues to be slow and won gain momentum till the Rabi season is in full swing in the dying months of the calendar year. DAP fertiliser off-take, too, has been on the lower side, despite almost stagnant urea prices, reflecting on farmers economy, which may have suffered from the floods.
Urea prices have traditionally been slow to respond to international commodity prices, hence the drop in international urea price has not registered yet. Currently, urea inventory sits at a lowly 185 thousand tons, which could be insufficient to cater for Rabi season demand, especially as urea imports are planned for late December.
Should there be any disruption in feedstock gas supply, it could create a shortage of the all-important fertiliser in the peak season. There is also a chance of local urea prices inflating in case there is a shortage of local and imported urea. The economics has not changed yet; manufacturing fertiliser locally still has more economic benefit than importing it and diverting gas to textile units.
Midway into the Rabi season, urea prices are tipped to fall drastically in the international market. The local fertiliser players are in for a tricky little period, as imported price could catch up fast with the local urea price.
The government could well use the lever it often has in such cases, by importing more and selling it below locally manufactured rates. There would be more room available with lesser amount required for subsidy, should international urea price slip to $250/ton, as anticipated by market watchers.
But for now, gas supply should be ensured to all fertiliser plants on priority basis, to avoid unwanted shortage in the peak sowing season.
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